The Unfinished Business of the Obama Administration: Poverty & Unemployment

The Obama Administration has unfinished business: lots of it, actually. The President will no doubt seek re-election in November by emphasizing policy successes. He would do well, however, to seek re-election by also recognizing policy failures: recognizing them and committing his Administration to do better. To win re-election, that recognition will need to be honest and the commitment will need to be genuine.

There is a long list of issue areas in which the Obama Administration has – to put it politely – so far under-performed. Housing policy is one.[1] Holding bankers accountable is another.[2] Extracting us from unnecessary wars is definitely a third.[3] But the big domestic issue on which the Administration’s impact has been weakest is surely poverty and unemployment. The Administration might justifiably claim that things would have been even more awful, had a Republican president been in charge – and that anyway, so much of what they have tried to do has been blocked by Republicans; but that can be of little comfort to the literally millions of Americans who currently remain trapped in poverty, excluded from paid work, or forced to survive on temporary and part-time contracts that no longer pay a living wage. For them, the Administration could have done more, should have done more, and better start doing more – and doing more now – if a President elected with such grand promises in 2008 isn’t to find himself out of work come January.

The poverty statistics are appalling.[4] When Barack Obama took office, the official U.S. poverty rate stood at 14.3% and the number of the American poor stood at a record 43.6 million. In the most recent poverty figures available to us (for 2010), those numbers have actually risen – to 15.1% and to 46.2 million. And inside the general numbers, the scale of poverty affecting particular minority groups is even more severe. There are more than 46 million people (one American in seven) currently in receipt of food stamps, 15.5 million children living in poverty, and 21 million students receiving subsidized lunches (up from 18 million in 2006-7). Both political parties spent the prosperous 1990s “ending welfare as we know it:” but the limits on welfare provision created then are now operating in an economy only slowly emerging from recession. Cutting welfare rolls by 10 percent or more, as at least 11 states have done since 2007, simply throws the entire burden of poverty back onto the most vulnerable among us – especially onto the shoulders of single mothers with young children. Right now, “one in four low-income single mothers nationwide – about 1.5 million – are jobless and without cash.” As Congress failed to act on poverty throughout 2011, research showed that “the share of households with children in a given month living on less than $2 per person per day…has nearly doubled since 1996, to almost 4 percent.” So that “even when counting food stamps as cash…one in every 50 children” in the contemporary United States “live in such a household.”[5] These numbers are truly awful, and raise the question: how much worse must the poverty figures become before solving poverty rises to the very top of Washington’s political agenda? It should be there now, but it certainly isn’t.

One reason for this increase in poverty is the persistence of large-scale unemployment pushing more and more Americans towards or into the ranks of the officially poor.[6] When Barack Obama took office, the unemployment rate in the U.S. economy was 7.6%, and very quickly thereafter became 10.2% (November 2009). It is now down to 8.1% – some small success – but 8.1% still leaves 12.5 million Americans out of work and the ratio of job-seekers to vacancies still in excess of 4:1.[7] Currently, over 5 million Americans have been out of work for over 27 weeks (the figure in 2007 was 1.2 million)[8] and the unemployment rate among workers under the age of 25 is running at 16%.[9] Since January 2009, the ranks of the unemployed have been swelled, for the first time in a generation, by cuts in public sector employment – 611,000 state and local employees, including 196,000 educators, culled since the Obama term began[10] – cuts that fall particularly heavily on African-American workers[11] and on women. Unemployment among African-Americans, at 13%, is nearly twice that that among whites (7.5%). 683,000 women have lost their jobs since 2009.[12] Overall indeed, the unemployment situation is now so dire that as recently as November 2011, more than half of all unemployed Americans had exhausted their unemployment benefits – benefits that the Census Bureau estimates keep more than 3 million people from just slipping below the official poverty level for their size of family.[13]

Why this persistence of unemployment? Mainly because job creation has slowed significantly in the contemporary U.S. economy. The rate of job creation has slowed in the immediate period: in April 2012 only 115,000 jobs were created, when a minimum of 125,000 a month is required merely to keep pace with population growth. That the unemployment figure actually fell slightly in April in spite of such a low volume of job creation (from 8.2% to 8.1%) reflects the growing despair of more and more unemployed Americans – some 342,000 of whom simply dropped out of the job market altogether that month, no longer looking for work. And well they might, for the long-term job creating capacity of the contemporary U.S. economy is also slowing down. Large U.S. companies are creating jobs again now, but those new jobs still remain disproportionately located overseas.[14] And when such companies expand their output domestically, their lack of confidence in future levels of American demand persuades more and more of them to either extend the hours of existing employees or hire temporary and part-time staff, rather than hiring permanent workers on strong salaries on the scale that both economic recovery and social justice now require. The contemporary U.S. economy remains a remarkable 10 million jobs short of the number needed to get back to pre-recession levels; and equally remarkably, a huge proportion of the jobs created since June 2009 (maybe 9 in every 10) have been purely temporary in nature.[15]

The result is that even those currently employed face growing pressures linked to inadequate pay, lack of worker rights and rampant job insecurity. It is worth noting here that unemployment is not the sole source of poverty in contemporary America. Low wages make a powerful contribution too. The 2010 poverty data showed that “three out of four of those below the poverty line work: half have full-time jobs, a quarter work part-time. Only a quarter do not work at all.”[16] Yet on the Obama watch thus far, middle-class incomes have completely stalled. “Real median household income in March was down $4,300 since Obama took office in January 2009, and down $2,900 since the June 2009 start of the recovery.”[17] (What is not down is the scale of debt accumulated by the middle class young. On the contrary, “total student debt outstanding appears to have surpassed $1 trillion late last year” according to the new Consumer Financial Protection Bureau.[18]) Alongside falling housing values and slow job growth, the other great driver of continuing economic stagnation is this slow pace of income growth: a slow pace set in motion by the steady erosion of manufacturing wages and the disproportionate concentration of new jobs in sectors that traditionally pay poorly. According to the latest Bloomberg Briefing, 70% of all the new hires in the last six months have been in such sectors: “concentrated in restaurants and hotels, health care and home health care, retail trade and temporary employment agencies.”[19] The President talks about creating good paying jobs. The task now is to get that creation underway.

Instead of coinciding with rising middle class incomes, the first term of the Obama Administration has been marked by yet another period of growing income and wealth inequality. In contemporary America, as middle class families struggle to cover their bills and the ranks of the poor continue to swell, the gap between productivity and wages goes on rising,[20] and the difference between pay at the top and pay at the bottom gets ever wider. The numbers are again shaking. In 2010, the first year of the recovery from the great recession, a staggering 93% of the total income gain in the U.S. economy went to the top one percent of income earners;”[21] and in 2011 (the second year of the recovery) “CEOs were paid, on average, 231 times more than workers ….By comparison, the CEO-to-worker compensation ratio was roughly 20-to-1 in 1965.”[22] Jamie Dimon, chief executive of JPMorgan Chase, earned $23.1 million in total compensation in 2011. John Stumpf of Wells Fargo netted $19.8 million, Vikram Pandit of Citigroup $14.9 million:[23] more proof, if more was still needed, that the U.S. economy continues to be scarred by incredible levels of greed at the top – greed which then generates desperate levels of deprivation at the bottom.

Is there an electoral price to be paid in November for some/all of this? It seems more than likely that there will be. It is not, of course, that the Republican Party would reverse any of this poverty if their candidates sweep all before them in November. Just the opposite: from top-to-bottom, the current Republican Party is proposing to shift cuts out of the military budget and onto poverty programs. House Republicans are actively canvassing for reductions in Medicaid, food stamps, unemployment benefits and child tax credits.[24] These Republicans tell us regularly that it is Obama who is taking us in a European direction, when the truth is that they are. The austerity measures canvassed by Washington Republicans are exactly those now being pursued inside the European Union, in the process creating massive unemployment in southern Europe and a double-dip recession in the U.K. We surely don’t want any more of that here.

No, if poverty relief is to come, it must come from the Democrats – but it will only come from them if economic and social policy fundamentally changes. The Obama Administration needs to recognize the urgency of that need for change. It also needs to recognize that the direction of policy change has to be away from the agenda which the Republicans are attempting to set – and not towards it – away towards a new deal for the poor and unemployed in America.

Tackling poverty and unemployment of this scale requires new and radical policy on at least four fronts.

l. A direct assault on poverty – a new “war on poverty” – that will send significant amounts of federal funding into urban renewal, school renovation, labor market training, child-care provision and strong programs of affirmative action: reinforced by changes to the tax code to guarantee a minimum but real living wage to all Americans.

2. The financing of that program by a serious policy of income redistribution and the strengthening of worker rights. Excessive incomes should be taxed, corporate tax loopholes closed, outsourcing penalized, trade union negotiating rights reinforced, and the minimum wage raised.

3. The design and implementation of a new stimulus package, this time designed to protect public sector employment at the state level, and to generate private sector permanent full-time employment on an ever increasing scale. Last time, the stimulus money was too limited in scale and permanence, and was too often used to finance an increase in working hours rather than employment levels.[25] Not this time round.

4. A fundamental assault on the forces currently slowing the rate of economic recovery. The main blockage on that recovery right now is an inadequate level of consumer demand, and an associated lack of confidence among would-be investors about future demand capacity. Restoring that confidence requires first that policy restores consumer demand: by moving swiftly to end the foreclosure crisis, to end public sector job-culling, and to pull federal spending back from wars overseas to the building of infrastructure at home.

Back in the 1930s, it took FDR two goes to get his New Deal up and running. It is time for the Obama Administration to take heart from that, and have a second go itself. A genuinely radical New Deal please – campaigned for now, won in November, and put in place during a ground-breaking second term.

[6] When the President delivered his State of the Union Address in January 2012, the economy was 10 million jobs short of its 2007 level: 6.1 million fewer jobs than before the recession, plus 4 million that we needed to add to keep pace with the normal growth of the working population. (Heidi Shierholz, Labour market still needs more than 10 million jobs, EPI Economic snapshot, January 24, 2012: available at http://www.epi.org/publication/labor-market-needs-10-million-jobs/)

“At the state level, government accounted for more than half of all job losses for industries that lost jobs since August 2010 in 27 states, and made up 100% of losses for industries that lost jobs in Arizona, Idaho, Massachusetts, North Dakota, Oregon, Pennsylvania and Texas. Government losses also made up more than 50 percent of losses in seven of the 10 states with the largest number of jobs lost, and six of the 10 states with unemployment rates above 9.5 percent.” (David Cooper, Austerity’s effect on state job growth, posted January 30, 2012: available at http://www.epi.org/blog/austerity-effect-state-job-growth/)

[15] “In the two years after the Great Recession ended in June 2009, U.S. staffing firms have created more new jobs than any other industry. According to the U.S. Bureau of Labor Statistics, the temporary help service industry added nearly half a million workers and accounted for 91% of total nonfarm job growth from June 2009 through June 2011.” (American Staffing Association, Leading U.S. Job Growth, Staffing Success, 2011: available at http://www.americanstaffing.net/newsroom/newsreleases/10_10_11.cfm))

[…] anti-poverty programs on several previous occasions, hoping each time not to have to make them again. But sadly they are still needed. Poverty levels remain unacceptably high in contemporary America; […]

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